Honors Thesis Spotlight: Belt and Road Initiative in Southeast Asia: Unlocking Alternative Sources of Investment for Corrupt States

In 2013, the Chinese government launched the Belt and Road Initiative (BRI): a regional integration project that establishes routes and provides resources to approximately 70 countries and national organizations. Benefits and negative consequences accompany the initiative; while poorer countries in Southeast Asia benefit from financial aid, there are still roadblocks to economic freedom, including corruptive practices. To understand the effects of foreign investment and corruption, author Jacob David Mason analyzes the organizations involved in Southeast Asia to assess the infrastructure gap, extent of corruption, and  possible anti-corruption methods.

The thesis commences with a literature review focused on three aspects of the infrastructure gap in Southeast asia:  the infrastructure investment gap, the BRI, and the history of the Association of Southeast Asian Nations (ASEAN). The infrastructure gap is at the core of China’s motives in starting the BRI program. The government is actively pursuing the status of an economic superpower, and investing in the initiative takes them one step closer to peripheral diplomacy. It also deters countries from seeking private investments: a risky decision that could lead policy failure, public investment, planning failure, project development capacity failure, and private finance failure. Here, ASEAN’s beneficial role is pronounced. Much like the European Union, the ASEAN signed a free trade agreement to promote economic mobility and foreign investments into the area. The ASEAN is the binding force between these countries and a catalyst for economic growth through trade agreements, currency swaps, and financial aid given to these countries to aid in the infrastructure gap. Unfortunately, ASEAN is also renowned for its corrupting nature.

Corruption in the ASEAN is disproportionately affecting the poorest citizens of the world and impeding economic growth. As corruption grows, it stops fair trade agreements, fair wages, and hinders social and political development. Bribes related to infrastructure projects can set a country lead to economic digression.  Using FDI (Foreign Direct Investment) inflows per capita the author constructs two graphs to examine the influence of corruption and poor regulatory environment on countries in the ASEAN. Both graphs show a positive correlation but exclude how domestic political affairs can add to the correlation. For example, the prime minister ofMyanmar was accused of embezzling money. To avoid further speculation, the prime minister withdrew from foreign funding and distanced himself from all aid coming in from China and nongovernmental organizations, thus hindering the economic growth of the country.

Corruption is plaguing Southeast Asia with one rare exception: Singapore. The country is ranked in the top three least corrupt countries, and they are the model student in avoiding corruption to promote economic stability. By holding their public officials and servants to a higher standard, and enforcing anti-corruption laws, Singapore has created a stronghold in fighting corruption. On the opposite side of the spectrum are Myanmar and Laos; both countries make a semi-valiant effort to combat corruption within their country to promote the flow of foreign investment. For example, Laos established the State inspection and anti-corruption committee in 2001; alas, the first corruption case was opened in 2014. Also before 2017, the Anti- Corruption Commission of Myanmar would only investigate 66 of the 4500 complaints. Despite the slow arrival of anti-corruption policies, both Myanmar and Laos have joined international organizations and are actively trying to fight against corruption. Already, there has been an influx of foreign investment due to the effort against corruption.

In conclusion, the Belt and Road Initiative helps over 150 countries and allows China to make its mark as an economic superpower and the catalyst for Southeast Asia’s economic growth. The lack of transparency and rampant corruption does not allow for the countries listed to have proper regulatory institutes. This hinders them from seeking truly meaningful foreign aid elsewhere and leaves China as the sole provider. If these problems are not addressed, and corrupt institutions are not taken apart, then the countries in the Southeast Asia area will greatly suffer and not be able to prosper like their counterpart, Singapore. Ultimately, no drastic change may happen in the next number of years but it is crucial for economic prosperity that small changes happen shortly.

Jacob David Mason graduated from the College of Social Sciences at Florida State University. This post is based on Jacob’s honors thesis, written by COSSPP Blog Intern Camila Levy. You can learn more about Jacob here. Jacob’s thesis was approved by their committee and will soon be available for public consumption.

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